Senior executive highlights GST 2.0 as key demand trigger, with small cars projected to grow at 10% CAGR amid rising affordability, festive momentum, and financing tailwinds.
11 Sep 2025 | 4001 Views | By Prerna Lidhoo
The Indian automotive industry is gearing up for a significant growth revival, with GST 2.0 set to act as a catalyst for demand revival across segments. The industry is poised to return to its earlier growth trajectory of around 7% CAGR by next year, while the small car segment could ...
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The Indian automotive industry is gearing up for a significant growth revival, with GST 2.0 set to act as a catalyst for demand revival across segments. The industry is poised to return to its earlier growth trajectory of around 7% CAGR by next year, while the small car segment could outpace the market with a 10% growth rate, according to Partho Banerjee, Senior Executive Officer, Marketing & Sales, Maruti Suzuki India Limited.
“The CAGR used to be around 7% for the Indian auto industry. We feel it will go back to that same level by next year," he said on the sidelines of SIAM’s (Society of Indian Automobile Manufacturers) 65th annual convention.
The reduction in GST rates has brought cheer to both consumers and automakers. Banerjee pointed out that while big cars will see a 3.5% reduction in prices for the end consumer, the more meaningful benefit is in the small car buyers, which enjoys a 8.5% cut, a move that directly addresses affordability concerns.
“Affordability was always a big challenge in the small car space. This reduction will help two-wheeler users upgrade to four-wheelers. The benefit in absolute terms may be higher for big cars, but for small cars, the impact is transformational,” he explained.
Maruti Suzuki has also confirmed that it will pass on the entire GST benefit to customers, not just for new cars, but also for parts and service. On smaller hybrids (under 4m), Banerjee stressed that Maruti Suzuki remains technology-agnostic and is committed to offering multiple powertrain options to customers.“We are already in the hybrid space with our bigger cars. We feel there is an opportunity in hybrids as well. GST is not the only criterion on which we will take decisions we want to offer all forms of technology and let customers choose,” he said.
Festive Season Outlook
With inquiries in Maruti Suzuki showrooms already up by 15%, Banerjee is optimistic about the festive season. However, he cautioned against comparing year-on-year demand trends because of shifting festival calendars and the GST announcement holding back purchases in August. “This festive season will also see pent-up demand coming through, as many customers had postponed purchases waiting for GST clarity,” he said.
To avoid inventory pile-up at dealerships, Maruti is "dispatching vehicles only on request from dealers", keeping the balance stock at the factory. Banerjee expects the supply chain to stabilize as the festive season progresses.
Multiple Tailwinds for Growth
Beyond GST, Banerjee highlighted two additional tailwinds supporting demand revival like income tax relief announced by the government, which has already started reflecting in higher disposable incomes and lower repo rates, which banks and NBFCs are expected to pass on from October, making auto financing more attractive.
“Customers will now have more surplus money in their pockets because of income tax benefits, prices will be reduced due to GST cuts, and loans will become cheaper. All of this will help the small car buyer,” Banerjee said.
Despite being one of the world’s largest car markets, India’s car penetration remains at just 34 cars per 1,000 people. Banerjee believes this creates immense headroom for growth. “Even if we reach 44 per 1,000, the auto industry would have to scale to a level of six million units. This shows the potential ahead,” he noted.